The rules around anonymous donations to local election campaigns are to be toughened up in the wake of the John Banks campaign cash scandal.

The maximum anonymous donation is to be lifted from $1000 to $1500, but disclosure rules will become stricter.

Local government minster David Carter has announced proposed changes which also revise the description of anonymous and introduce penalties for non-compliance.

Currently, politicians must declare the source of donations over $1000 if they know who the donor is.

It will bring the regulations in line with the laws that govern elections to Parliament.

Carter said the changes reflect ''growing public concern about transparency and accountability in relation to candidate donations, and in particular anonymous donations.''

Under the new rules, any anonymous cash over $1500 must be paid to the electoral officer.

Campaign workers who receive an anonymous donation of more than $1500 must also reveal the identity of the donor to the candidate, if known.

Banks was investigated by police this year over anonymous donations to his failed bid to be mayor of Auckland super-city.

Detectives found he solicited money for the campaign from internet tycoon Kim Dotcom, but were unable to establish whether he knew two gifts of $25,000 came from the German millionaire. The return was completed by campaign volunteers.

Banks also marked a $15,000 donation as anonymous. It was believed to have come from SkyCity casinos.

Police said the SkyCity donation, written out as a cheque to Team Banksie 2010, was handed to Banks in a sealed envelope.

It was subsequently recorded in the electoral return by the Treasurer for Banks' team as anonymous.

It was discovered he also solicited radio advertisements declared as anonymous. But charges could not be brought because of a time bar in the Local Electoral Act.

In July, Prime Minister John Key said: ''The law literally is an ass in this particular case.'' But the Government would only make changes if it could find the time.

Carter said the new amendments will be combined with the Local Electoral Amendment Bill currently before Parliament.

The Local Electoral Amendment Bill will be introduced early next month so the changes will be in force for the local authority elections in October next year.

Labour Leader David Shearer accused Key of hypocrisy over the rule change.